Annual report pursuant to Section 13 and 15(d)

OPERATING SEGMENTS

v3.10.0.1
OPERATING SEGMENTS
12 Months Ended
Dec. 31, 2018
Operations, Reportable Information, by Operating Segment  
OPERATING SEGMENTS
OPERATING SEGMENTS
As of December 31, 2018, our organizational structure consisted of the following operating segments: Europe, Middle East and Africa; Latin America; North America; Asia Pacific; and Bottling Investments. Our operating structure also included Corporate, which consists of two components: (1) a center focused on strategic initiatives, policy and governance, and (2) an enabling services organization focused on both simplifying and standardizing key transactional processes and providing support to business units through global centers of excellence.
Segment Products and Services
The business of our Company is nonalcoholic beverages. Our geographic operating segments (Europe, Middle East and Africa; Latin America; North America; and Asia Pacific) derive a majority of their revenues from the manufacture and sale of beverage concentrates and syrups and, in some cases, the sale of finished beverages. Our Bottling Investments operating segment is composed of our Company-owned or consolidated bottling operations, with the exception of those that are classified as discontinued operations, regardless of the geographic location of the bottler. Our Bottling Investments operating segment also includes equity income from the majority of our equity method investments. Company-owned or consolidated bottling operations derive the majority of their revenues from the sale of finished beverages. Generally, finished product operations produce higher net operating revenues but lower gross profit margins compared to concentrate operations. Refer to Note 3.
The following table sets forth the percentage of total net operating revenues related to concentrate operations and finished product operations:
Year Ended December 31,
2018

 
2017

 
2016

Concentrate operations
64
%
 
51
%
 
40
%
Finished product operations
36


49

 
60

Total
100
%
 
100
%
 
100
%

Method of Determining Segment Income or Loss
Management evaluates the performance of our operating segments separately to individually monitor the different factors affecting financial performance. Our Company manages income taxes from continuing operations and certain treasury-related items, such as interest income and expense, on a global basis within Corporate. We evaluate segment performance based on income or loss from continuing operations before income taxes.
Geographic Data
The following table provides information related to our net operating revenues (in millions):
Year Ended December 31,
2018

 
2017

 
2016

United States
$
11,344

 
$
14,727

 
$
19,899

International
20,512

 
20,683

 
21,964

Net operating revenues
$
31,856

 
$
35,410

 
$
41,863

The following table provides information related to our property, plant and equipment — net (in millions):
Year Ended December 31,
2018

 
2017

 
2016

United States
$
4,154

 
$
4,163

 
$
6,784

International
4,078

 
4,040

 
3,851

Property, plant and equipment — net
$
8,232

 
$
8,203

 
$
10,635


Information about our Company's continuing operations by operating segment and Corporate as of and for the years ended December 31, 2018, 2017 and 2016, is as follows (in millions):
 
Europe, Middle East & Africa

 
Latin
America

 
North
America

 
Asia Pacific

 
Bottling
Investments

 
Corporate

 
Eliminations

 
Consolidated

 
2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net operating revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   Third party
$
7,138

 
$
3,975

 
$
11,505

 
$
4,809


$
3,760

 
$
105

 
$

 
$
31,292

 
   Intersegment
564

 
39

 
263

 
388

 
11

 

 
(701
)
 
564

4 
   Total net operating revenues
7,702

 
4,014

 
11,768

 
5,197

 
3,771

 
105

 
(701
)
 
31,856

 
Operating income (loss)
3,714

 
2,321

 
2,453

 
2,278

 
(649
)
 
(1,417
)
 

 
8,700

 
Interest income

 

 
70

 

 

 
612

 

 
682

 
Interest expense

 

 

 

 

 
919

 

 
919

 
Depreciation and amortization
85

 
30

 
422

 
58

 
239

 
252

 

 
1,086

 
Equity income (loss) — net
2

 
(19
)
 
(2
)
 
12

 
828

 
187

 

 
1,008

 
Income (loss) from continuing operations
   before income taxes
3,406

 
2,247

 
2,494

 
2,305

 
(612
)
 
(1,490
)
 

 
8,350

 
Identifiable operating assets1
7,985

 
1,715

 
17,913

 
1,999

2 
4,135

2 
22,649

 

 
56,396

5 
Investments3
789

 
784

 
400

 
216

 
14,367

 
3,718

 

 
20,274

 
Capital expenditures
77

 
90

 
429

 
31

 
316

 
404

 

 
1,347

 
2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net operating revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   Third party
$
7,332

 
$
3,956

 
$
8,796

 
$
4,767

 
$
10,379

 
$
138

 
$

 
$
35,368

 
   Intersegment
42

 
73

 
1,954

 
409

 
81

 

 
(2,517
)
 
42

4 
   Total net operating revenues
7,374

 
4,029

 
10,750

 
5,176

 
10,460

 
138

 
(2,517
)
 
35,410

 
Operating income (loss)
3,625

 
2,218

 
2,591

 
2,147

 
(962
)
 
(2,020
)
 

 
7,599

 
Interest income

 

 
44

 

 

 
633

 

 
677

 
Interest expense

 

 

 

 

 
841

 

 
841

 
Depreciation and amortization
91

 
37

 
411

 
65

 
454

 
202

 

 
1,260

 
Equity income (loss) — net
48

 
(3
)
 
(3
)
 
11

 
878

 
140

 

 
1,071

 
Income (loss) from continuing operations
   before income taxes
3,706

 
2,211

 
2,320

 
2,179

 
(2,358
)
 
(1,316
)
 

 
6,742

 
Identifiable operating assets1
5,475

 
1,896

 
17,619

 
2,072

2 
4,493

2 
27,060

 

 
58,615

5 
Investments3
1,238

 
891

 
112

 
177

 
15,998

 
3,536

 

 
21,952

 
Capital expenditures
81

 
55

 
541

 
50

 
662

 
286

 

 
1,675

 
2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net operating revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   Third party
$
7,014

 
$
3,746

 
$
6,587

 
$
4,788

 
$
19,601

 
$
127

 
$

 
$
41,863

 
   Intersegment
264

 
73

 
3,738

 
506

 
134

 
5

 
(4,720
)
 

 
   Total net operating revenues
7,278

 
3,819

 
10,325

 
5,294

 
19,735

 
132

 
(4,720
)
 
41,863

 
Operating income (loss)
3,668

 
1,953

 
2,614

 
2,210

 
1

 
(1,789
)
 

 
8,657

 
Interest income

 

 
27

 

 

 
615

 

 
642

 
Interest expense

 

 

 

 

 
733

 

 
733

 
Depreciation and amortization
93

 
35

 
426

 
80

 
1,013

 
140

 

 
1,787

 
Equity income (loss) — net
62

 
18

 
(17
)
 
9

 
648

 
115

 

 
835

 
Income (loss) from continuing operations
   before income taxes
3,749

 
1,966

 
2,592

 
2,238

 
(1,955
)
 
(454
)
 

 
8,136

 
Capital expenditures
62

 
45

 
438

 
107

 
1,329

 
281

 

 
2,262

 
1 
Principally cash and cash equivalents, short-term investments, marketable securities, trade accounts receivable, inventories, goodwill, trademarks and other intangible assets, and property, plant and equipment — net.
2 
Property, plant and equipment — net in India represented 10 percent and 11 percent of consolidated property, plant and equipment — net in 2018 and 2017, respectively.
3 
Principally equity method investments and other investments in bottling companies.
4 
Intersegment revenues do not eliminate on a consolidated basis in the table above due to intercompany sales to our discontinued operations.
5 
Identifiable operating assets excludes $6,546 million and $7,329 million of assets held for sale discontinued operations as of December 31, 2018 and December 31, 2017, respectively.
During 2018, 2017 and 2016, our operating segments and Corporate were impacted by acquisition and divestiture activities. Refer to Note 2.
In 2018, the results of our operating segments and Corporate were impacted by the following items:
Operating income (loss) and income (loss) from continuing operations before income taxes were reduced by $4 million for Latin America, $175 million for North America, $31 million for Bottling Investments and $237 million for Corporate, and increased by $3 million for Europe, Middle East and Africa and $4 million for Asia Pacific due to the Company's productivity and reinvestment program, including refinements to prior period accruals. In addition, income (loss) from continuing operations before income taxes was reduced by $64 million for Corporate and $4 million for Latin America due to pension settlements related to the Company's productivity and reinvestment program. Refer to Note 14 and Note 19.
Operating income (loss) and income (loss) from continuing operations before income taxes were reduced by $450 million for Bottling Investments due to asset impairment charges. Refer to Note 17.
Operating income (loss) and income (loss) from continuing operations before income taxes were reduced by $139 million for Bottling Investments due to costs incurred to refranchise certain of our bottling operations.
Operating income (loss) and income (loss) from continuing operations before income taxes were reduced by $33 million for Corporate due to tax litigation expense. Refer to Note 12.
Operating income (loss) and income (loss) from continuing operations before income taxes were reduced by $19 million for Corporate related to noncapitalizable transaction costs associated with pending and closed transactions.
Income (loss) from continuing operations before income taxes was reduced by $476 million for Bottling Investments due to the refranchising of certain bottling territories in North America. Refer to Note 2.
Income (loss) from continuing operations before income taxes was reduced by $334 million for Europe, Middle East and Africa, $205 million for Bottling Investments and $52 million for Latin America due to other-than-temporary impairment charges related to certain of our equity method investees. Refer to Note 17.
Income (loss) from continuing operations before income taxes was reduced by $278 million for Corporate related to realized and unrealized gains and losses on equity securities and trading debt securities as well as realized gains and losses on available-for-sale debt securities. Refer to Note 4.
Income (loss) from continuing operations before income taxes was reduced by $124 million for Bottling Investments and increased by $13 million for Corporate due to the Company's proportionate share of significant operating and nonoperating items recorded by certain of our equity method investees.
Income (loss) from continuing operations before income taxes was reduced by $149 million for Bottling Investments due to pension settlements related to the refranchising of North America bottling operations. Refer to Note 14.
Income (loss) from continuing operations before income taxes was reduced by $79 million for Corporate related to economic hedging activity associated with the purchase of Costa, which we acquired on January 3, 2019. Refer to Note 6 and Note 22.
Income (loss) from continuing operations before income taxes was reduced by $34 million for North America primarily related to payments made to convert the bottling agreements for certain North America bottling partners' territories to a single form of CBA with additional requirements. Refer to Note 2.
Income (loss) from continuing operations before income taxes was reduced by $33 million for Bottling Investments primarily due to the reversal of the cumulative translation adjustments resulting from the substantial liquidation of the Company's former Russian juice operations.
Income (loss) from continuing operations before income taxes was reduced by $32 million for Corporate related to acquiring a controlling interest in the Philippine bottling operations. Refer to Note 2.
Income (loss) from continuing operations before income taxes was increased by $296 million for Corporate related to the sale of our equity ownership in Lindley. Refer to Note 2.
Income (loss) from continuing operations before income taxes was increased by $47 million for Corporate related to the refranchising of our Latin American bottling operations. Refer to Note 2.
Income (loss) from continuing operations before income taxes was increased by $27 million for Corporate related to a net gain on the extinguishment of long-term debt. Refer to Note 11.
In 2017, the results of our operating segments and Corporate were impacted by the following items:
Operating income (loss) and income (loss) from continuing operations before income taxes were reduced by $26 million for Europe, Middle East and Africa, $7 million for Latin America, $241 million for North America, $10 million for Asia Pacific, $57 million for Bottling Investments and $193 million for Corporate due to the Company's productivity and reinvestment program. Income (loss) from continuing operations before income taxes was also reduced by $116 million for Corporate due to pension settlements related to the Company's productivity and reinvestment program. Refer to Note 14 and Note 19.
Operating income (loss) and income (loss) from continuing operations before income taxes were reduced by $737 million for Bottling Investments and $34 million for Corporate due to asset impairment charges. Refer to Note 17.
Operating income (loss) was reduced by $280 million and income (loss) from continuing operations before income taxes was reduced by $419 million for Bottling Investments due to costs incurred to refranchise certain of our bottling operations. Refer to Note 2.
Operating income (loss) and income (loss) from continuing operations before income taxes were reduced by $225 million for Corporate as a result of a cash contribution we made to The Coca-Cola Foundation.
Operating income (loss) and income (loss) from continuing operations before income taxes were reduced by $67 million for Corporate due to tax litigation expense. Refer to Note 12.
Income (loss) from continuing operations before income taxes was reduced by $4 million for Europe, Middle East and Africa, $2 million for North America, $70 million for Bottling Investments and $16 million for Corporate due to the Company's proportionate share of significant operating and nonoperating items recorded by certain of our equity method investees.
Income (loss) from continuing operations before income taxes was reduced by $2,140 million for Bottling Investments due to the refranchising of certain bottling territories in North America. Refer to Note 2.
Income (loss) from continuing operations before income taxes was increased by $445 million for Corporate due to a gain recognized resulting from the merger of CCW and CCEJ. Refer to Note 18.
Income (loss) from continuing operations before income taxes was reduced by $313 million for North America primarily related to payments made to convert the bottling agreements for certain North America bottling partners' territories to a single form of CBA with additional requirements. Refer to Note 2.
Income (loss) from continuing operations before income taxes was increased by $150 million for Corporate related to the remeasurement of our previously held equity interests in CCBA and its South African subsidiary to fair value. Refer to Note 2.
Income (loss) from continuing operations before income taxes was increased by $88 million for Corporate due to a gain recognized upon refranchising our China bottling operations and selling a related cost method investment. Refer to Note 2.
Income (loss) from continuing operations before income taxes was reduced by $50 million for Corporate due to an other-than-temporary impairment charge related to one of our international equity method investees. Refer to Note 17.
Income (loss) from continuing operations before income taxes was reduced by $38 million for Corporate due to the early extinguishment of long-term debt. Refer to Note 11.
Income (loss) from continuing operations before income taxes was reduced by $26 million for Corporate due to a charge related to our former German bottling operations.
Income (loss) from continuing operations before income taxes was increased by $25 million for Corporate due to Coca‑Cola FEMSA, an equity method investee, issuing additional shares of its stock during the period at a per share amount greater than the carrying value of the Company's per share investment. Refer to Note 17.
In 2016, the results of our operating segments and Corporate were impacted by the following items:
Operating income (loss) and income (loss) from continuing operations before income taxes were reduced by $32 million for Europe, Middle East and Africa, $134 million for North America, $1 million for Asia Pacific, $322 million for Bottling Investments and $105 million for Corporate and increased by $2 million for Latin America due to the Company's productivity and reinvestment program, including refinements to prior period accruals. Refer to Note 19.
Operating income (loss) was reduced by $276 million and income (loss) from continuing operations before income taxes was reduced by $297 million for Bottling Investments due to costs incurred to refranchise certain of our bottling operations. Refer to Note 2.
Operating income (loss) and income (loss) from continuing operations before income taxes were reduced by $200 million for Corporate as a result of cash contributions to The Coca-Cola Foundation.
Operating income (loss) and income (loss) from continuing operations before income taxes were reduced by $153 million for Bottling Investments due to impairment charges recorded on certain of the Company's intangible assets.
Operating income (loss) and income (loss) from continuing operations before income taxes were reduced by $76 million for Latin America due to the write-down we recorded related to our receivables from our bottling partner in Venezuela due to changes in exchange rates. Refer to Note 1.
Operating income (loss) and income (loss) from continuing operations before income taxes were reduced by $9 million for Bottling Investments and $32 million for Corporate related to noncapitalizable transaction costs associated with pending and closed transactions.
Income (loss) from continuing operations before income taxes was reduced by $118 million for Bottling Investments due to pension settlement charges primarily as a result of our refranchising activities. Refer to Note 14.
Income (loss) from continuing operations before income taxes was reduced by $52 million for Bottling Investments and $9 million for Corporate due to the Company's proportionate share of significant operating and nonoperating items recorded by certain of our equity method investees.
Income (loss) from continuing operations before income taxes was reduced by $2,456 million for Bottling Investments primarily due to the refranchising of certain bottling territories in North America. Refer to Note 2.
Income (loss) from continuing operations before income taxes was increased by $1,323 million for Corporate as a result of the deconsolidation of our German bottling operations. Refer to Note 2.
Income (loss) from continuing operations before income taxes was reduced by $72 million for Corporate as a result of remeasuring our net monetary assets denominated in Egyptian pounds. Refer to Note 18.
Income (loss) from continuing operations before income taxes was reduced by $31 million for North America related to payments made to convert the bottling agreements for certain North America bottling partners' territories to a single form of CBA with additional requirements. Refer to Note 2.